“Emergency oil” from alternative sources has not arrived

In response to the global energy crisis, the government initiated a process to directly procure fuel oil from alternative sources. Under this mechanism, 56 foreign companies applied, and contracts were awarded to eight of them. Several more are awaiting approval. However, none of these suppliers has delivered oil so far. In other words, over the past two months, no “emergency supply” of fuel oil has arrived. At present, an open tender has been floated to procure oil for the July–December period.

Despite the situation, there is currently no fuel shortage in the country. After an increase in supply, congestion at filling stations has eased, and situations have largely returned to normal. A shipment of crude oil is expected in the first week of the month, and discussions are ongoing regarding two additional crude oil shipments.

For May, diesel demand stands at 370,000 tonnes. Suppliers have confirmed the arrival of 329,000 tonnes. Octane demand is 37,000 tonnes, of which 24,000 tonnes will come from local sources and around 26,500 tonnes are expected through imports. If direct procurement succeeds in bringing in additional diesel and octane, stock levels may further improve.

Officials of the Bangladesh Petroleum Corporation (BPC) explain that fuel procurement is planned in six-month cycles. Around 50 per cent of refined fuel is purchased through government-to-government (G2G) agreements, while the remaining half is procured via open tender.

The procurement plan for July–December was finalised in March last year. However, in response to the emerging crisis, BPC began considering direct procurement, which has now caused delays. Officials warn that failure to ensure stable supply may once again trigger a crisis.

According to BPC sources, a company first proposed fuel supply on 7 March. Within five days, the proposal was processed, approved by technical committees and the board, and forwarded to the energy division. By 12 March, it received approval from both the Economic Affairs Committee and the Cabinet Committee on Purchase.

The company, A&A Energy Oil and Gas LLC, registered in Florida in 2018, was granted approval to supply 100,000 tonnes of diesel from Kazakhstan. It was also expected to receive approval for an additional 100,000 tonnes later, totaling 200,000 tonnes.

However, although the company was required to submit a performance guarantee by 22 April, it failed to do so. As a result, the notification of award (NOA) was cancelled.

Energy officials report that 56 companies have submitted proposals to BPC so far, and eight have been awarded contracts. Several others are awaiting cabinet approval. Yet, no fuel has been delivered in the past two months, and prospects remain uncertain.

Only one local representative has submitted a performance guarantee for 25,000 tonnes of diesel.

Officials say that after geopolitical tensions escalated following a joint US-Israel strike on Iran on 28 February, global energy markets became volatile. Supply uncertainty increased, prompting the government to seek alternative sources. This led to a surge of unsolicited proposals from companies, some of which were backed by influential political and bureaucratic figures. In many cases, approvals were granted rapidly under pressure, sometimes without full verification.

Chairman of Bangladesh Petroleum Corporation, Md Rezanur Rahman, told Prothom Alo that the proposed price was considered in determining the performance guarantee (PG). However, payment will be made after the arrival of the vessel, based on the prevailing market price. Therefore, there is no scope for excess payment.

He further said that in line with the Public Procurement Rules (PPR), 28 days were initially given for submitting the PG. Later, the interested company voluntarily reduced this to seven days. Approval was granted following proper verification. Two more companies have said they will submit PGs. If three work orders under direct procurement are successfully implemented, an additional 400,000 tonnes will be added.

He said there will be no problem with the supply of fuel oil. Tenders are being invited to purchase oil for July–December.

According to BPC sources, after sales on 28 April, diesel stock stands at 181,000 tonnes, which is equivalent to 15 days of supply. A total of 75,000 tonnes of diesel is being discharged from three vessels, while another 33,000 tonnes is awaiting unloading. Octane stock stands at 42,933 tonnes, equivalent to 35 days of supply. Petrol stock stands at 17,640 tonnes, equivalent to 12 days of supply. However, 100 per cent of petrol and 50 per cent of octane are produced domestically, although raw materials must be imported.

Under direct contracts, work orders have so far been issued for the purchase of 900,000 tonnes of diesel, 100,000 tonnes of crude oil, and 25,000 tonnes of octane. Among these, according to the NOA issued on 16 March, the UAE-based company PetroGas International Corporation is supposed to supply 100,000 tonnes of diesel and 25,000 tonnes of octane from the United States.

The Netherlands-based AP Energy Investment Limited is to supply 100,000 tonnes of diesel from Hong Kong. On 27 March, Hong Kong’s Superstar International Limited joined the project with this company and is expected to supply 200,000 tonnes of diesel from Azerbaijan and Uzbekistan.

A company named ExxonMobil Kazakhstan Incorporation received a contract on 3 April to supply 100,000 tonnes of diesel from Kazakhstan, the United States, and the Netherlands. Malaysia’s Abir Trade and Global Markets, which received a contract on 2 April, is to supply 100,000 tonnes of crude oil from that country.

On 8 April, Kazakh Gas Processing Plant LLP received a contract to supply 100,000 tonnes of diesel from Kazakhstan. Switzerland’s Yaar Energy received a contract on 16 April to supply 100,000 tonnes of diesel, proposing to source it from the Netherlands.

Inquiries at the BPC office yesterday, Wednesday, revealed that among these, only the UAE-based PetroGas company has submitted a PG for 25,000 tonnes of diesel. It signed a supply agreement with BPC on 26 April. However, the PG was deposited in the bank by a local representative on behalf of the parent company. It has been given until 30 June to deliver the oil. BPC will open a letter of credit upon receiving confirmation of supply and the port of delivery.

Additionally, Singapore’s DBS has received approval from the Cabinet Committee on Economic Affairs to supply 100,000 tonnes of diesel and 25,000 tonnes of octane from Kazakhstan. BPC has also forwarded proposals from three more companies to the Energy Division.

According to BPC sources and details from several work orders, although the government opted for direct procurement in an emergency, this has not been reflected effectively in practice. Initially, each company was given 28 working days to submit PGs. After signing contracts and opening letters of credit, the import process would begin—making the timeline considerably lengthy. Later, some companies were asked to submit PGs within 7 working days.

BPC officials and experienced oil traders in the country say that most of these companies lack their own infrastructure for fuel supply. They are primarily trading firms that aim to buy oil cheaply in one market and sell it elsewhere. Their experience is also limited. During crises, such companies tend to appear in large numbers. A similar trend was observed during the Russia-Ukraine War in 2022, when several companies had promised to supply oil at lower prices, but none ultimately delivered.

Former Director General of the Central Procurement Technical Unit, Farooq Hossain, told Prothom Alo that there is no fixed timeframe for direct contracts. Therefore, in emergency situations, the time for submitting PGs should be reduced. Had this been done earlier, oil procurement could have been completed more quickly. BPC eventually adopted this approach. However, even in emergencies, contracts should not be awarded without proper verification. If work is assigned based on capability, experience, and financial strength, failure to supply oil should not occur.